When Disaster Strikes, Customer Relationships Can Be Critical

A credit card data security breach was not a positive event in the history of Hannants, but the way the company handled it mitigated the problem and made customers feel like they were included in the solution -- more like partners than like victims. Hannants trusted its customers and their reaction to the news, and the company was rewarded with a largely positive response from its customers in social media.

Developing good relationships with your customers pays off when all is going well -- but it can also pay big dividends when things go very wrong. In fact, as a recent case illustrates, those relationships nurtured through CRM can set the tone for your corrections and preserve your business.

The business in question is
Hannants, a chain of hobby shops in Great Britain. Hannants has cultivated an international mail order business that sells to customers in North and South America, Asia, and throughout Europe.

Out of the blue, Hannants had a problem. The company that fulfilled its credit card transactions suffered a security breach, and the personal data of its many customers was stolen. Some of the data was used fraudulently.

How did Hannants respond?

Confronting the Problem

First, the company shut down its online e-commerce site. Then, it immediately sent out an email to its customers -- all of them, including those who were on its mailing list but had not conducted credit card transactions with the company. The email explained what had gone on, what the company knew about the situation, and gave specific advice about what customers could do to secure their personal data.

That wasn't the end of it. As Hannants learned more about the situation, it didn't keep it secret. It sent out a series of emails updating customers as it learned about the extent and scope of the problems, then re-opened its website not to sales, but to customers who wanted to change their data.

Certainly, this was not a positive event in the history of Hannants, but the way the company handled it mitigated the problem and made customers feel like they were included in the solution -- more like partners than like victims. Hannants trusted its customers and their reaction to the news, and the company was rewarded with a largely positive response from its customers in social media.

"I can think of dozens of examples of companies with the 'ostrich syndrome' or the blanket denial strategem in similar situations," said Brett Peacock on the hobby discussion forum Hyperscale. "They would not be getting any of my business. Hannants WILL get my business again."

"Perhaps they are still run by someone that actually care about what they do?" said Thomas Lund on the same forum. "They will get my money again -- once it's safe again!"

Implementing Solutions

Hannants hit nearly all the right notes in its response to the security breach -- which can neatly be summed up in these six points:

Don't lie. Describe exactly what's going on, in as much detail as you feel the customers can use.

Be proactive. Contact people who have not yet complained, if you think they might have a problem arising out of the situation.

Keep the information coming until the matter is resolved. It's a lot easier to maintain confidence in an organization that is responding with a rational plan of action, even if that means it has to figure out what went wrong before it can fix anything.

Forget about who's at fault. No one wants to hear that you're not at fault -- they want it fixed. You want it fixed too. If you can describe the cause, fine, but allow others to draw whatever conclusions they choose from the facts.

Thank people for their patience. Most will be understanding so long as there's an indication you are aware of their needs, too.

Adopt partial solutions quickly if they don't compromise the permanent fix. It gives a sense of progress, which is reassuring.

There's a seventh point -- but it's one you'll have to have in place before a problem occurs. It's the creation of real relationships with the customer. Without well-established and nurtured customer relationships, even an all-star response to a problem can't keep customers from jumping ship. Had Hannants had an indifferent relationship with customers, would any of these efforts have helped -- or would they have seemed like a temporary fix to a bigger problem? Would customers have been as willing to work with Hannants and wait for problems to be resolved, or would they have moved to other options for their hobby needs?

Making Lemonade

Studies have shown that a customer who's had a problem handled and resolved in a satisfactory manner is more likely to be loyal than a customer who never experiences a problem.

By handling a problem in a way that's transparent, proactive and helpful, Hannants may have achieved that satisfactory resolution on a broad scale, and turned an unfortunate event into something that further strengthens its customer relationships.

CRM Buyer columnist Chris Bucholtz blogs about CRM at
Forecasting Clouds. He has been a technology journalist for 15 years and has immersed himself in the world of CRM since 2006. When he's not wearing his business and technology geek hat, he's wearing his airplane geek hat; he's written two books on World War II aviation, and his next two are slated for publication in 2010.